Blankfein Hires Lawyer Weingarten for Justice Investigation

Lloyd C. Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc., speaks during a session on day two of the World Economic Forum in Davos, Switzerland. Photographer: Daniel Acker/Bloomberg

Aug. 23 (Bloomberg) -- Goldman Sachs Group Inc. Chief
Executive Officer Lloyd C. Blankfein and other employees hired
attorneys this year when the U.S. began a probe of matters
raised by the Senate’s Permanent Subcommittee on Investigations.

Attorney General Eric H. Holder said on May 3 that the
Justice Department was reviewing an April report on the
financial crisis by the Permanent Subcommittee, led by Carl M.
Levin, a Michigan Democrat, and Thomas A. Coburn, Republican of
Oklahoma. The report accused Goldman Sachs of misleading clients
about complex mortgage-related investments in 2007, and Levin
alleged that Blankfein misled Congress.

“As is common in such situations, Mr. Blankfein and other
individuals who were expected to be interviewed in connection
with the Justice Department’s inquiry into certain matters
raised in the PSI report hired counsel at the outset,” the
company said yesterday in an e-mailed statement.

Goldman Sachs fell 4.7 percent in New York trading on
concern that Blankfein’s hiring of a criminal defense attorney
could mean the firm will face more legal woes. He has been
represented by Reid H. Weingarten, a partner at Steptoe &
Johnson LLP in Washington, since the Justice Department inquiry
began, according to a person familiar with the matter.

Weingarten is a friend of Holder’s, with whom he helped
found the nonprofit See Forever Foundation, according to
Weingarten’s biography on Steptoe & Johnson’s website.

Wall Street’s Role

Blankfein, 56, hasn’t been charged with wrongdoing amid
federal probes of Wall Street’s role in the housing boom and
credit crisis. Goldman Sachs is paying Blankfein’s legal costs,
according to the bank.

Goldman Sachs has said the testimony its employees gave to
the Permanent Subcommittee “was truthful and accurate and this
is confirmed by the subcommittee’s own report.”

Reuters reported yesterday that Blankfein had hired
Weingarten, citing an unidentified government source. The report
contributed to the decline in Goldman Sachs’s stock, which
closed at $106.51 on the New York Stock Exchange and has dropped
37 percent this year.

“The fact that the attorney was hired months ago rather
than recently moderates the impact and implications of the
story,” William Tanona, an analyst at UBS AG who has a “buy”
rating on the stock, wrote in a note yesterday. Still “these
continued distractions increase the probability of a management
reshuffle over the next few years, which will undoubtedly cause
some investor angst.”

Built a Reputation

Weingarten won the acquittal in May of Lauren Stevens, a
former GlaxoSmithKline Plc attorney accused of impeding a U.S.
Food and Drug Administration investigation. He also represented
Elizabeth Monrad, the former chief financial officer at General
Reinsurance Corp. who was convicted in an accounting fraud
scandal. She won a retrial earlier this month.

Weingarten previously represented former WorldCom CEO
Bernard Ebbers, who was sentenced to 25 years in prison after he
was convicted of an $11 billion fraud. He defended former Enron
Chief Accounting Officer Richard Causey, who was sentenced to 5
1/2 years in prison.

Goldman Sachs, the fifth-biggest U.S. bank by assets, was
subpoenaed earlier this year by the Manhattan District
Attorney’s office for information related to the Permanent
Subcommittee’s report, a person familiar with the matter said in
early June.